Jack Mintz: A Sinking Dollar Is Trudeau’s Latest Legacy

Here is the rewritten text without any references to specific articles or editorials:

The Canadian Dollar’s Troubled History

The Canadian dollar has been a contentious issue in past federal elections. Its devaluation can have significant consequences for the economy and politicians.

A Brief History of the Loonie

In 1962, Canada’s economy was weakening, and the Diefenbaker government was at odds with Bank of Canada governor James Coyne over monetary policy. As a result, the Canadian dollar sank from parity to 92.5 US cents. This devaluation contributed to the downfall of the Diefenbaker government in 1963.

In 1974, the loonie reached an all-time high of $1.04 but slid to 69.1 cents in 1986 due to growing deficits and lower commodity prices. The Canadian dollar hit its lowest point at 61.8 US cents in January 2002 following the September 11 attack.

However, a resource boom during the Harper years saw the loonie return to parity before falling again in 2014. Since then, it has fluctuated around 75 cents but trended downward over the past year.

Factors Contributing to the Loonie’s Decline

Commodity prices play a significant role in the Canadian dollar’s value, as resources account for over half of Canada’s export earnings. Political risk and investors’ concerns about debt also contribute to the loonie’s decline.

The Bank of Canada’s decision to cut interest rates has not been matched by the US Federal Reserve, which could lead to a further decline in the Canadian dollar. Additionally, increased private and public indebtedness will put pressure on the loonie as investors become more concerned about servicing this debt.

A Weakening Loonie

Oil prices are expected to soften due to decreased Chinese demand and an oil supply glut. The US Federal Reserve is not expected to cut interest rates as much as the Bank of Canada has felt necessary, given Canada’s weaker economy and lower inflation forecasts.

The Canadian dollar may weaken further in 2025, especially if Trump tariffs are applied. This will soften the impact on exporters but hurt importers. The loonie’s decline will be another negative aspect of Justin Trudeau’s legacy, adding to Canadians’ economic concerns.

Bookmark Our Website

To stay up-to-date with business news and support our journalism, bookmark our website at financialpost.com and sign up for our newsletters here.